Being able to retire with financial wealth is something we all hope for, as our retirement years can be some of the most exciting of our lives. In order to make the best of those years, however, you need to have a reliable source of income. Investing in a traditional IRA is one of the best ways to make that happen, but you may have many questions about it, as most people do. Following are simple, basic answers to some of the most common Traditional IRA questionsto help you get started planning your financial future.
6 Common Traditional IRA Questions
Question: What is a Traditional IRA?
Answer: It is an individual retirement account that allows you to save with tax-deferred earnings and the possibility of tax-deductible contributions. You are eligible to contribute to your IRA if you are employed and younger than 70 1/2 years of age.
Question: Can I withdraw money from the account at any time?
Answer: You can withdraw money from the IRA at any time, but you may be subject to an IRS tax penalty if you withdraw money before the age of 59 1/2.
Question: Will I have to pay tax on the amount I withdraw?
Answer: You must include all pre-tax assets (deductible contributions and earnings) in your taxable income when you withdraw money from your Traditional IRA. If you have made nondeductible contributions to a Traditional IRA or have rolled over nondeductible contributions from a retirement planto your IRA, a portion of each distribution will be treated a the nontaxable return of these contributions.
Question: Can I add money from my other retirement accounts into my IRA?
Answer: Simplified employee pension plan employer contributions can be made to Traditional IRAs, and eligible assets from most employer-sponsored retirement plans, such as a 401k, also can be rolled over into the account.
Question: What happens to my IRA after my death?
Answer: You may designate one or more beneficiaries who will receive the assets in your IRA after your death. If your spouse is your beneficiary, your spouse may transfer or roll over your Traditional IRA to his or her own Traditional IRA.
Question: Am I eligible for a tax credit for my IRA contribution?
Answer: You may qualify for the saver’s tax credit of up to $1,000 if:
- your income falls within certain limits,
- you are at least 18 years of age,
- you are not eligible to be claimed as a dependent by another taxpayer, and
- you are not a full-time student.
Ask Us About the Specifics
These are simple answers to the most common Traditional IRA questions, so you may have many others. Speak with one of our credit union accountrepresentatives to learn more about opening a Traditional IRA in Georgia and to discuss specific factors in your case.
Contact us through our Georgia Heritage Federal Credit Union website or by phone at (912) 236-4400, or step into one of our credit union branches in the Savannah Metropolitan Area.